Converged Systems Bridge the Prepaid and Postpaid Divide
Hanna Hurley
06/01/2002
Establishing prepaid and postpaid customers on a single system can lead to many new opportunities for service providers. But they aren’t convinced that the untested systems can ensure high performance, fault tolerance and scalability.Prepaid customers, once classed as an anonymous group of credit risks, are garnering newfound respect from service providers. As their target shifts from the credit-challenged to teenagers, college students and grandparents—all of whom are usually attached to a high-paying postpaid customer—service providers want to secure a holistic view of these subscribers.
Enabling flexible, customer-oriented services is only one potential benefit of a converged prepaid and postpaid billing system. Billing providers outline a half-dozen other advantages, which include lowering the costs of managing two systems, enabling data and content services for prepaid customers, limiting risk on high-value transactions, improving customer service and increasing ARPU (average revenue per user).
“In our vision, subscribers won’t be classified as pre or post. An operator will offer a customer a basket of services and two payment methods. How the customer pays won’t limit the types of services available,” says George McCarthy, director of product management and strategic marketing in SchlumbergerSema’s prepaid market segment.
This service parity becomes increasingly important in light of upcoming 2.5G and 3G services, but current prepaid systems handle voice only.
Merging Prepaid With Postpaid
The billing providers expect their preintegrated solutions to be a sure bet, but other industry experts disagree. “In today’s economy, when carriers are so squeezed, it’s difficult to persuade them to invest in entire new systems,” says David James, principal consultant at Ovum. “It’s more likely that they will add a piece to an existing system and replace the absolute minimum.”
As always, cost is a critical issue for service providers, but the billing developers counter that integrating disparate systems comes with a higher price tag than their converged offerings. “At this point upgrading an existing system is as costly as buying a new system,” says Rene Sotola, CTO for AMS’ Tapestry.
Moving away from cost issues, the billing providers attempt to sway operators by explaining the inherent benefits of a tightly coupled packaged solution. “Those service providers that want to force existing systems together will only achieve a loose coupling. The customer care software may be integrated with back-end billing, or the prepaid and postpaid billing may be integrated, or a shared product catalog may be created,” says Darren McKinney, director of Amdocs’ mobile product marketing. “But the loose couplings can’t support a common product catalog, a common rating engine, shared mediation, and a combined customer database. To get to that level, service providers will need a pre-integrated system.”
Roadmap for Convergence
Most service providers have long-term plans for converging their pre- and postpaid systems. In the short term, they are slowly bringing their systems closer together. Typically, the first step will be to enhance the intelligent network (IN) to measure and rate more than minutes and add capabilities for text messaging and later other content, such as music and photos.
More proposed work includes building abstract interfaces to the proprietary prepaid system to open it up to other network elements, as well as rating and CRM software. The final phases will include more combined, tightly coupled systems. SchlumbergerSema’s McCarthy describes the features of a final, fully converged system:
• A common customer care layer built on top of the pre- and postpaid systems
• A common subscriber database
• Unified services and tariffs
• Integrated balance management
• Integrated payments and recharge
• A common platform and technology.
By applying a phased approach, Robert Chen, senior manager, market development at Portal says, operators gain incremental impacts to the bottom line in the initial stage due to offering the same level of services. The big return, however, occurs in the second phase, when the operational benefits of a single environment begin to appear.
Cingular is one carrier contemplating a converged platform package. “We know the advantages of converged systems,” says Charlotte Wright, vice president of IT application development. “Our disparate solutions are more complex and have a higher cost of ownership, but we have concerns about the billing companies’ newly announced, unproven technologies. Before we commit, we have to test performance and scalability.”
Potholes on the Convergence Path
Performance and scalability are only two concerns facing carriers contemplating a converged system. Operators will have to tackle a host of tough, unresolved issues.
Rating. When rating calls, prepaid and postpaid billing systems are complete opposites. Prepaid services take advantage of the IN’s real-time rating capabilities, and postpaid services are rated after the call and uploaded to the billing system by batch mode.
Some networks however don’t use IN. Rather than relying on the network to provide data in real time, these technologies read the balance of the card and start their own timer.
As operators with IN move toward a converged system, they could use two rating engines until they migrate to one. The IN would address prepaid calls, and a legacy rater for postpaid could be replaced with one of the new rating engines to enable more converged flexibility.
“IN may rate the event initially,” says Amdocs’ McKinney. “The rated transaction would be passed to our platform and rerated if necessary. We would collect the data from IN that is already rated, take it through our mediation layer and into our rating process. It could be rerated based on postpaid usage, left alone, or applied a discount.”
However, multiple rating engines can lead to revenue leakage. “If one event is rated in real time and another as a post event, each rating could possibly get a different result. With two engines, you cannot guarantee that you will get the same results,” says McCarthy.
Portal’s Liam Maxwell, director of product marketing, describes this scenario as a workaround applying fast mediation to enrich the CDRs before they are passed to the billing system. “A single rating engine is a much better solution,” he says. “Mediation and prepaid are not a good mix. If there is mediation, it means the transaction has already happened, but in prepaid you may need to stop transactions before they happen.”
For a converged system, service providers ultimately want a single rating engine. Everyone seems to think a single rating engine is doable, but there’s debate about whether the rating must be done in real time.
In ADC’s converged environment scenario, a prepaid subscriber can open an account or refill an account balance through the postpaid account. Before the subscriber begins to use the credit, an interface with the postpaid account will alert the prepaid account to how much credit the subscriber has. The call length or services purchased will depend on the amount of credit available.
“The interaction doesn’t have to work in real time; it can occur a short time before the call,” says Neil Thilpott, director of product marketing at ADC. “The prepaid system doesn’t have to record what is spent while the call is going on. It only has to tear down the call if the call goes past the credit limit.”
Amdocs’ McKinney further explains how pre-rating and designated fixed charges diminish the need for real-time rating. In a commerce transaction, such as purchasing a train ticket from a prepaid account, the transaction is prerated. The proposed cost to travel from Point A to Point B is forwarded to the billing system, which confirms whether the funds are available. “There is a time lag, but the credit risk is minimized, because the transaction isn’t confirmed until the account balance is confirmed.”
Real-time rating is a hardship for most billing systems because of performance demands on each network layer. “We try to bill as fast as possible, but the speed is slowed by each interaction, and delays can be introduced at multiple points,” says McKinney. “Timing depends on how fast the mediation layer is and how quickly mediation can get the information to the rater and how often the rater operates. The struggle is even further up in the network, too. Timing will depend on when the information is made available to the mediation layer. The network may only create records every five minutes.”
AMS’ Sotola agrees that real-time rating demands improvements in many areas, not just the rating engine. “In 2.5G and 3G networks, mediation will have to gather information from many network elements and be fast enough to deliver data in real time. The data must be rated in real time and relayed to the billing system to measure the money in the account and give the command to deactivate if necessary. Activation, billing and mediation will all have to manage real-time demands.”
Even with the demands, the approach at SchlumbergerSema favors rating events in real time. “During the event, we track the event and monitor the balance,” says McCarthy. “If the account nears its threshold, we can make an announcement alerting that the call is ending and tear down the call if the subscriber exceeds the threshold.”
A major drawback to rating in real time, though, is the cost. McCarthy figures real-time rating is six times more expensive than postpaid, batch-oriented rating, and three times more expensive than near real-time rating.
Cost and network requirements do play into the real-time rating argument, but Accenture’s Tim Hourigan, a partner in the consulting group’s communications and high-tech operating group, says the billing developers still need to improve their real-time rating engines. “All the billers we have looked at have limitations around real-time rating,” he says. But Hourigan quickly adds that many of the new services being considered may not demand robust real-time rating. “In most cases,” he says, “the billing system will only need to know the transaction, not the volume of the transaction.”
Performance. Cingular is more concerned about sustaining the throughput of its legacy systems than whether the data is rated in real or near real time. “Speed and throughput are critical for us, yet none of the billers have proved that they can handle the amount of data that we are processing,” Wright says.
To improve performance, carriers and billing developers are looking to third-party developers, such as TimesTen, to increase throughput. TimesTen’s in-memory database architecture, explains Wright, allows the application to be loaded into resident memory. As transaction records are processed, the reads and writes are captured in resident memory.
Amdocs and SchlumbergerSema are two of the companies that have partnered with TimesTen. “We’re all trying to solve the same set of problems,” says John Trembley, director of telecom and networking at TimesTen. “As 3G services arrive and converged systems are deployed, the transactions must write to the database. The billing systems can read the database fast, but they don’t have high availability or the ability to write to the database. We fill those gaps.”
TimesTen was brought in at one European operator that was combining WAP prepaid and GPRS postpaid on a single system. The system couldn’t support the 2 million subscribers, so TimesTen was added to release the bottleneck occurring at the database.
Shared databases and product catalogs. Every operator wants a single customer database and a shared product catalog, but migrating current prepaid and postpaid systems is no easy task. Standardizing what customer information will be stored and cleaning the data invariably slow the deployment of a converged platform.
“Operators are plagued by poor quality data held in disparate systems,” says Ovum’s James. “They must decide what level of information about the customer must be stored in a common platform and ensure the data’s accuracy. More often than not they are left with a very low level of customer details.”
The billing developers all tout a common database and promote the need for a shared product catalog, but they don’t offer an easy migration plan. Instead, they focus on how it benefits the CSRs, supports marketing personnel trying to better understand customer buying habits, and improves customer care.
A combined product catalog and customer database also has benefits, explains Amdocs’ McKinney. It opens up new service and payment options. “The subscriber and operator can decide which services are pre- or postpaid,” he says,” and subscribers can decide how they want to pay.”
Yet for time-sensitive, next-generation products, the product catalog may create new challenges. “Some dynamic products, like a video clip of a winning goal, may have a life cycle of a day, unlike the current set of services that last for years,” says ADC’s Thilpott. “Today’s customer care and billing systems are not geared for these dynamic, constantly rotating products. Operators will have to consider ERP tools that include extensive cataloging and layering.”
Taxes. The convoluted tax schemes in North America will have to be addressed in any converged pre- and postpaid system, especially if an operator introduces real-time rating. Attempting to rate taxes in real time will be a significant challenge due to roaming agreements.
Currently, most prepaid systems include taxes in their rates. This method of calculation is a result of backlash from early prepaid plans. “The preliminary prepaid offerings mentioned rate per minute but added taxes,” says Dawn Jaglowski, product manager for Convergys’ Atlys. “The subscribers thought they were buying at 7 cents a minute, but the cost was really 12 cents when they added the taxes. Now, operators include taxes up front so subscribers will know what they are buying.”
A converged platform will need to interface to one of the tax packages in use by service providers. “Most billing developers try to simplify the rate structure rather than create complex rating algorithms,” Jaglowski says. “A simple rate structure allows them to easily predict taxes and factor them into the charges.”
Opening up prepaid systems to next-generation services will have many tax implications that are yet to be addressed. Until these issues are resolved, many operators will be hesitant to converge the platforms.
“Today the prepaid platform and offering are straightforward, because roaming and other issues have major tax implications,” says Cingular’s Wright. “The offering is limited because we’re limited on how we manage the transactions on the back end. As the platforms converge, we don’t have an answer [for] how to handle some items. These issues will be a key challenge as we go beyond a region or market, and real-time rating will add an entire new level of complexity.”
IN flexibility. Because IN is voice-centric, the signaling network is excellent at setting up, rating and tearing down calls, but it is not suitable for data. “IN can’t categorize or correlate the content. It doesn’t know where the data came from or what amount of data was transferred,” says Portal’s Chen. “These deficiencies prevent operators from offering prepaid customers next-generation services or flexible price plans.”
Operators heavily invested in the IN may consider an interim platform that integrates a converged platform with IN. European operators have chosen this route, says Shirley Evans, senior director of product management at Convergys, but North American operators may hesitate to invest in the legacy network because of the costs required to upgrade the switches.
Those that do attempt integration will find that modifying the proprietary infrastructure and working with the network element’s closed interfaces is not an easy task. Billing developers are discussing integrating into IN and the service control point, says Accenture’s Hourigan, but these proposals are new territory with no real-world examples.
Even with the limited number of proven solutions, Wright says she’s seen much more collaboration between the billing providers and the IN vendors to create more service-centric solutions. “Billing providers, network providers and traditional IT providers are creating more combined solutions with mediation, gateways and switching to create a more fluid architecture.
Standards bodies are also attempting to smooth the path. CAMEL (Customizable Applications for Mobile Enhanced Logic) is being deployed within some GSM networks so that service providers can deploy and manage prepaid roaming. Enhancements to CAMEL will support real-time rating for data and SMS, and real-time content rating.
Will North America Follow Europe’s Lead?
Much of the projected growth for converged pre- and postpaid services is based on prepaid’s successes in Europe. The European operators, expecting that prepaid subscribers will readily accept next-generation services, are adding converged platforms.
In April Virgin Mobile announced a contract with ADC to offer pre- and postpaid services in the United Kingdom. A trend toward converged platforms in North America is also emerging. PrimeCo Personal Communications announced in April an outsourcing contract to Convergys, which will support PrimeCo’s prepaid and postpaid services in a single billing and customer care system.
These customer contracts are early indicators that service providers are interested in converged billing platforms. But don’t expect the new systems to be deployed immediately. Customer migration concerns, performance and scalability testing, dirty data and inflexible legacy systems will stall the deployments. As Wright cautions, “In a perfect world, we all want a single platform. We want a single rating engine, product catalog and customer database. We set it on the horizon, but these projects take time.”
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